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Technology sharing and tacit collusion

  • Levy, Nadav

I study the prospects for collusion between rival firms that share technological know-how. Two common forms of technology sharing are compared: a research joint venture (RJV) and licensing. Under licensing, firms can use the licensing fee to elicit higher levels of R&D than with an RJV. However, firms must also be induced to license innovations ex post. For a broad set of cases, licensing yields higher collusive profits to firms and higher prices to consumers. In other cases, licensing can only be induced through a very high license fee, leading to excessive R&D and lower profits. In these cases, the colluding firms prefer to share technology through an RJV.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 30 (2012)
Issue (Month): 2 ()
Pages: 204-216

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Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:204-216
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Jorde, Thomas M & Teece, David J, 1990. "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 75-96, Summer.
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  5. Baumol, William J., 2001. "When is inter-firm coordination beneficial? The case of innovation," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 727-737, April.
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